News & Analysis

Settling Employee Who Refused to Comply With Non-Disparagement Agreement Could Potentially Face Jail Time

Many negotiated severance agreements contain confidentiality provisions and non-disparagement clauses. In a reminder that these provisions must be taken seriously, a federal judge has held a former Genzyme Corp. employee in contempt – with the possibility of incarceration – for her repeated refusals to comply with those provisions of her settlement agreement with Genzyme.

This unusual case was brought to the SDNY on a motion for preliminary injunction by Genzyme Corp., which alleged that its former employee – from whom it had obtained a valid waiver and release of claims in the context of an overall settlement agreement – was violating the agreement by disclosing the allegations of her settled claims against the company, disparaging and defaming Genzyme and its employees, and posting objectionable items on the internet.

The former employee, turned defendant, failed to oppose Genzyme’s motion and the Court issued an injunction ordering her to cease the disclosures. She did not comply with the order. The Court found her to be in contempt and directed her to pay monetary fines as a sanction. Yet, the former employee continued to ignore the Court’s order. As a result, Genzyme filed a motion for additional coercive sanctions, which was granted. The former employee now faces civil incarceration.

In negotiating agreements, it is important to make sure that clients understand, consider and fully agree to the settlement terms, particularly those that limit their future communications on the subject of their prior employers.